For example, a paper from the Federal Reserve Bank of New York suggested that colleges were raising their sticker prices because the federal government was giving students more loans.

But writing in The New York Times Magazine, Adam Davidson said the " single most important factor behind the rise in tuition" is that high tuitions allow colleges to "shape" their student bodies.

In essence, the higher the tuition cost, the easier it is for universities to recruit the exact type of students they want by offering them tuition discounts, according to Kevin Crockett, a consultant with Ruffalo Noel Levitz, a firm that helps colleges and universities set prices.

"I've got to have enough room under the top-line sticker price," Crockett told The Times Magazine.

Davidson explained: "A school that charges $50,000 is able to offer a huge range of inducements to different sorts of students: some could pay $10,000, others $30,000 or $40,000. And a handful can pay the full price."

A college is able to then recruit a diverse set of students with competitive test scores and accomplishments.

This, of course, explains primarily the reason for tuition increases at private colleges that don't get any state funding. At public universities, there are additional factors for tuition increases, such as students, rather than state governments, absorbing more college costs.